Morgan Stanley Cuts US Economic Growth Forecast to 1.55%

US investment bank Morgan Stanley has cut its forecast for US economic growth this year to 1.55% from 1.9% earlier.

In a report published on Saturday, the bank said that there are factors negatively affecting the US economy, including tariffs and the labor market, which remains constrained, leading to higher inflation, according to Reuters.

See also: US economy adds fewer jobs than expected in February

The report explained that "tariffs should translate into more resilient growth this year, while we previously assumed that they would weigh mainly on growth in 2026."

Economists at Morgan Stanley, led by Michael T. Gabin, indicated that growth expectations for the fourth quarter of this year were reduced to 1.55% from 1.9% earlier, and it also reduced its growth forecast for 2026 to 1.2% from 1.3%.

The report expected that President Donald Trump's tariffs would lead to higher inflation and increase pressure on the US Federal Reserve as it seeks to control ongoing inflationary pressures.

Regarding interest rate cuts, the bank believed that markets would eventually get these cuts, but much later than expected, referring to current market expectations of nearly 3 interest rate cuts this year.

Meanwhile, Goldman Sachs also lowered its GDP growth forecast for the fourth quarter of 2025 to 1.7%, from 2.2% previously, and raised the probability of a 12-month recession to 20% from 15%.

For his part, US Treasury Secretary Scott Bessent acknowledged that there are some signs of weakness in the US economy. In an interview with CNBC, the US secretary said that there will be "natural adjustments" in moving from public spending to private spending.

He added that "the market and the economy have become addicted, we have become addicted to government spending, and there will be a detox phase."